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July 15, 2009

Intel Surpasses Q2 Expectations Despite $398 Million Loss

Despite posting a 15 percent dip in revenue, Intel Corp. reported better-than-expected results in the second-quarter, paving a brighter picture for the PC market.
 
The Santa Clara, Calif.-based chip maker, the world's leader in the segment, posted a $398 million loss, which equates to 7 cents per share for the quarter ended March 28. A year ago, the company posted a profit of about $1.6 billion, or 28 cents per share.  
 
The loss comes as Intel (News - Alert) was hit with a $1.45 billion fine in May for allegedly violating European anti-trust rules. That fine, imposed by the European Commission, was issued after Intel was accused of abusing its top position in the market for computer chips in an effort to eliminate its main rival, Advanced Micro Devices (News - Alert) Inc.
 
The European Commission accused Intel of paying computer manufacturers and retailers not to use rival AMD’s (News - Alert) products, according to a CNN report. As a result, the commission issued a fine, which Intel plans to appeal, according to a company statement.
 
Yet excluding the fine, Intel reported high-than-expected revenue. The company recorded second-quarter revenue of $8 billion, up from $7.14 billion in the first quarter. Analysts projected second-quarter earnings would bring in $7.3 billion, MarketWatch said. Intel posted a net profit of $1 billion for the quarter, excluding the fine.
 
Intel CEO and President Paul Otellini said the company reported its strongest growth between the first and second quarters since 1988. He attributed the results to improving conditions in the PC market. And for the near term Intel has “a clear expectation for a seasonally stronger second half,” Otellini said in a statement.
 
"Intel's strategy of investing in new technologies and innovative products, combined with ongoing focus on operating efficiencies, continues to yield benefits that are evident in our strengthening financial performance," Otellini said.
 
The company's quarterly results are one of few bright spots in a sour economy, analysts said.
 
“You have an $8 billion quarter with very little enterprise spending taking place," Broadpoint Amtech analyst Doug Freedman told Reuters (News - Alert). "The consumer is healthier than we expected. "Intel has a much stronger seasonal second half. So the fact that Q2 is better than Q1 clearly puts the worst behind Intel."
 
A number of PC companies face increasing pressure as the global recession pulls back demand of the machines and lower-cost netbook PCs replace sales of the traditional units.
 
While Collins Stewart analyst Ashok Kumar agreed that Intel’s results were strong given the macro economic backdrop, he speculated on the true driver behind the numbers.
 
"Basically, very strong numbers for the quarter and guidance is in line with seasonal trends,” Kumar told Reuters in another report. "Despite those headwinds, the company delivered significant upside to both guidance, as well as expectations. The big unknown is whether it's anything more than inventory replenishment."
In the current quarter, Intel said it expected to report revenue of $8.5 billion dollars.
 
In other news, Intel recently announced plans to buy Wind River (News - Alert), a supplier of embedded tools, operating systems and services for $884 million. As TMCnet reported, Wind River will be a wholly-owned subsidiary of Intel operating under the Intel Software and Services Group, headed by Renee James. The acquisition is slated to close this summer.

Amy Tierney is a Web editor for TMCnet, covering unified communications, telepresence, IP communications industry trends and mobile technologies. To read more of Amy's articles, please visit her columnist page.


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